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This Benefits Bonanza Is More Big Serco Than Big Society

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http://www.guardian.co.uk/commentisfree/2011/apr/04/benefits-bonanza-big-serco-welfare

Incapacity benefit claimants began to be "invited" in for tough new work-capability assessments on Monday – an invitation they can't refuse. In two pilot schemes 70% of claimants were judged fit for work, with a third put straight on to jobseeker's allowance – leaving just 30% too frail to be chivvied further.

Last week the government announced who had won contracts for the work programme: there was shock when, out of 40 contracts worth between £3bn and £5bn, only two went to not-for-profit groups. Not so much "big society" as big Serco. The biggest winner – and a surprise – was Ingeus Deloitte, which won seven huge contracts amid acid observation that its CEO was a former director at the Department for Work and Pensions. Concern was expressed that Ingeus had underbid more experienced providers: price was a clinching factor in the official scoring system, whereas bizarrely previous performance was not scored at all.

The greatly disappointed voluntary sector will be relegated to sub-contracting. The big companies will hand down their difficult cases, such as addicts, ex-prisoners or the mentally ill – creaming 20%-30% off the top in "management fees". The Glasgow-based Wise Group, whose board I was on until recently, is a leading not-for-profit organisation, and was shocked to win no contract and see Scotland go to Ingeus Deloitte despite a lower success rate. Wise is the sixth most successful in the UK for the flexible new deal and top for finding people work in the new deal for the disabled. It's about as big society as they come. Why didn't it win? Possibly because it wouldn't and couldn't discount too steeply: the voluntary sector can't gamble and borrow as large companies can.

Among the winners is A4E (Action for Employment) – hardly surprising as its founder, Emma Harrison CBE, was named by David Cameron as his workless families tsar. As the Observer revealed, she and her husband have a joint income of some £1.4m from their welfare-to-work empire. While any public sector chief executive earning over the prime minister's £140,000 is ritually slaughtered by Eric Pickles, not a word is said about private sector chiefs making a killing out of public contracts. Serco's CEO had an 18% rise to £1.86m.

Cameron has announced his intention to outsource not just the NHS but virtually the entire public sector to "any willing provider" – with little concern about profits made from the public purse. The City financier Lord Freud, a Labour adviser turned Tory minister for welfare reform, made plain last week quite how far this will go. Announcing the-welfare to-work contracts, he said: "This is the ultimate blueprint for delivering a wide range of government services – and one that governments around the world will be taking a look at."

Let's hope they look hard at the evidence first. Last year the Commons public accounts committee reported on Labour's Pathways to Work scheme for getting incapacity benefit (IB) claimants back to work. The verdict was pretty damning. Not only did contracted companies miss their targets by miles – but the DWP's own Jobcentre Plus outscored them easily. The committee summoned two leading companies – A4E and Reed in Partnership – to give evidence. Sadly its findings seem to have been ignored as the government ploughs ahead with its near-identical scheme, only stopping to re-tweak the contracts.

Steve Marsland of A4E started by claiming his company had got 42% of IB claimants into work. The committee chair, Margaret Hodge, probed and found he meant 42% of those who volunteered for the programme. Out of the mandatory participants, how many? 15% against a target of 32% – though prodded again by Tory MPs Richard Bacon and Jo Johnson, his results turned out to be even lower: Surrey and Sussex achieved just 13% against an agreed target of 50%. With targets of 31%, A4E hit 12% in south-east Wales, 14% in West Yorkshire, 13% in north and mid Wales, and 16% in Devon and Cornwall. In south London, it was down to 9%. Reed's results were much the same.

Even worse emerged: a quarter of these "successes" fell out of their jobs before 13 weeks. What's more, that included the voluntary group, whereas the mandatory clients alone would have had a much higher drop-out rate. Asked about profit margins, on A4E's estimated £500m of government contracts, Marsland replied: "Last year we made just over 5% profit." Sharp-eyed Johnson spotted some evasiveness: before tax – the standard expression of profits – it was "about 9%".

The committee's report is remarkably trenchant: " The performance by the mainly private-sector providers was universally poor … £94m was spent on employment support that did not deliver additional jobs … Private providers have seriously underperformed against their contracts and their success rates are worse than Jobcentre Plus even though private contractors work in easier areas." Despite that, the clamour has begun for jobcentres to be outsourced to private companies. That would put a stop to embarrassing comparisons between the two sectors.

When Sir Leigh Lewis, permanent secretary at the DWP, appeared before the committee, Margaret Hodge said: "I cannot understand on both value for money and effectiveness for the client group, why we are moving to a greater dependence on private providers – given that we like to have evidence-based policy." The mandarin was left floundering with nothing to say but the truth. First, Jobcentre Plus "is a very effective and able organisation so it is quite a tough test [for private companies] to perform as well". Second, it's all ideological: "Ultimately these are political judgements and not ones for civil servants."

The companies claim their results have improved since then: even so this evidence makes the work programme's target to take a million people off IB wildly ambitious. The new contracts are tougher, heavily backloaded so they only pay out once claimants are found jobs.

So why do the companies want this business at a time of grim employment prospects? For two good business reasons: in previous contracts when they ran out of money they ganged together, demanded more – and got it. The government had no option. Not one company has ever been terminated for missing its targets. So price is flexible. The other reason is that these contracts are small beer, loss-leaders for large companies with their eye on massively lucrative future contracts in the great Cameron outsourcing bonanza.

This comment is quite interesting..

Just to point out that the non-profit National Autistic Society had a success rate of 63% or greater on Pathways to Work, despite Autistics having worse employment chances than other disabled people or any other category of people for that matter.

Context, it matters

I wonder if this is a one-off, or whether if its an average for non-profits across the sector?

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The idea that the likes of Serco provide better value than public employees is fairly laughable.

I've worked for several places where Serco have "won" the contracts to supply the service and then provided a far worse service, with much higher admin costs and worse outcomes.

The basic business model appears to be (1) win the contract (2) take on 80% of the existing staff (3) don't do anything other than exactly what has been agreed to in the conditions of the agreement (4) reduce service to the minimum within the service level agreement and if you don't meet them then pretend you have (5) cream off the profits until they get rid of you.

The amount of meetings I sat through in 2 years in the public sector with Serco execs to discuss their poor performance beggars belief.

However the rules of tendering will always mean they are the others will win every tender. Change the rules and smaller providers who want to help could win.

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The idea that the likes of Serco provide better value than public employees is fairly laughable.

I've worked for several places where Serco have "won" the contracts to supply the service and then provided a far worse service, with much higher admin costs and worse outcomes.

The basic business model appears to be (1) win the contract (2) take on 80% of the existing staff (3) don't do anything other than exactly what has been agreed to in the conditions of the agreement (4) reduce service to the minimum within the service level agreement and if you don't meet them then pretend you have (5) cream off the profits until they get rid of you.

The amount of meetings I sat through in 2 years in the public sector with Serco execs to discuss their poor performance beggars belief.

However the rules of tendering will always mean they are the others will win every tender. Change the rules and smaller providers who want to help could win.

Surely that is the point of a contract, meet the terms of the contract for as little cost as possible. If the people negotiating the contract stipulate minimum terms then this is what the company for-filling the contract will aim for, no one will do more than they have to so in that sense its a minimum and maximum target.

If no one negotiates what happens if targets are not met then that is there fault. Contract negotiators for the gov have a hell of a lot of power because of the amounts of resources they are dealing with but they don't seem to use it very well and are generally quite poor at stipulating a decent minimum standard and what happens when things don't work out.

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The idea that the likes of Serco provide better value than public employees is fairly laughable.

How can a company that makes a profit ever be better than directly employing people?

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Surely that is the point of a contract, meet the terms of the contract for as little cost as possible. If the people negotiating the contract stipulate minimum terms then this is what the company for-filling the contract will aim for, no one will do more than they have to so in that sense its a minimum and maximum target.

If no one negotiates what happens if targets are not met then that is there fault. Contract negotiators for the gov have a hell of a lot of power because of the amounts of resources they are dealing with but they don't seem to use it very well and are generally quite poor at stipulating a decent minimum standard and what happens when things don't work out.

Absolutely right. Generally speaking one needs to watch where these powerful contract negotiators go after a few years... generally to a comfortable "consultancy" with the contract winner / derivative, living the good life. These are the smart ones. Also, we have stupidly gotten rid of a lot of expertise in the public sector in the name of efficiency, therefore what's left may not be able to competently negotiate a contract, particularly the technical ones (see MoD c*ckups ad nausem) and are easily hoodwinked by the contracting company. See this all the time, really.

Contracting out to the private sector can work, but only if it is done well, robust contracts are drawn up and the public representatives are confident enough to withhold payment due to non-satisfaction of contract terms. I suspect that is a bit too much to ask on a country-wide basis.

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Surely that is the point of a contract, meet the terms of the contract for as little cost as possible. If the people negotiating the contract stipulate minimum terms then this is what the company for-filling the contract will aim for, no one will do more than they have to so in that sense its a minimum and maximum target.

If no one negotiates what happens if targets are not met then that is there fault. Contract negotiators for the gov have a hell of a lot of power because of the amounts of resources they are dealing with but they don't seem to use it very well and are generally quite poor at stipulating a decent minimum standard and what happens when things don't work out.

I'd agree that the negotiators on the council side are generally not a match for the private companies, which is another reason not to outsource.

As an example one place I worked outsourced the helpdesk operation to Serco, the same staff who formed our helpdesk were employed by Serco, so we gained no expertise. The problem was before that helpdesk staff would help out with other bits and pieces such as helping out staff with mobile phones, sitting in on negotiations with software suppliers etc etc and although there were clauses covering this type of stuff Serco would challenge every one and use it to try and charge extra. In the end managing the contract cost more time than the "savings" it was supposed to generate and all the staff were re-employed directly.

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How can a company that makes a profit ever be better than directly employing people?

If you want to funnel tax money to your mates in exchange for a kickback, they are great.

Public versus private is a misnomer, all that counts is the consumer can refuse to pay. Taxpayers cannot refuse to pay, whether their taxes go to Acmecorp or the treasury makes ****** all difference to that.

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Shows clearly the opinion you read here about the non effectiveness and poor value of the public sector can be so misinformed.

I think you miss the point that most people on here discriminate between private companies that are independant of the public sector (eg Tesco) and companies that replace Public Sector (eg Network Rail).

Anything that is effectively Public Sector, just with a middleman layer of management/troughing is near as damn it Public Sector for most of our purposes. If you can't tell the difference, chances are you yourself are public sector...

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I think you miss the point that most people on here discriminate between private companies that are independant of the public sector (eg Tesco) and companies that replace Public Sector (eg Network Rail).

Anything that is effectively Public Sector, just with a middleman layer of management/troughing is near as damn it Public Sector for most of our purposes. If you can't tell the difference, chances are you yourself are public sector...

I rather thought there was a big clamour on here to replace public sector with private sector as far as possible. and this being driven by the belief that the public sector must be poor value and inefficient.

I dont quite understand the meaning of your comment that " if I cant tell the difference, chances are you yourself are public sector " I was pointing out that a certain point of view aired daily on here can be misinformed, and that the press article posted by the OP evidences that.

Although my point is a valid one I can confirm for you that I do currently and since 2003 work in the private sector if that helps you digest my opinion.

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I rather thought there was a big clamour on here to replace public sector with private sector as far as possible. and this being driven by the belief that the public sector must be poor value and inefficient.

I dont quite understand the meaning of your comment that " if I cant tell the difference, chances are you yourself are public sector " I was pointing out that a certain point of view aired daily on here can be misinformed, and that the press article posted by the OP evidences that.

Although my point is a valid one I can confirm for you that I do currently and since 2003 work in the private sector if that helps you digest my opinion.

I think there is a big clamour on here for free market solutions over violent ones.

As stated before, public versus private is a misnomer, all that matter is that the person paying gets the option to refuse that payment.

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The idea that the private sector can provide better public services is absolute nonsense. They're main aim is profit - that's what a private company is set up to produce. They don't give a toss about society and they don't give a toss about the public realm. They'll do it on the cheap, cream off the profits and leave the taxpayer with the crap to clean up - it's a gravy train ..taxpayers are being ripped off by these companies.

+1

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The idea that the private sector can provide better public services is absolute nonsense. They're main aim is profit - that's what a private company is set up to produce. They don't give a toss about society and they don't give a toss about the public realm. They'll do it on the cheap, cream off the profits and leave the taxpayer with the crap to clean up - it's a gravy train ..taxpayers are being ripped off by these companies.

In cases where its easy to set a definitive standard for what is to be provided the private sector can usually be better. Think of refuse collection. If the contract says waste must be collected once every week then its hard to wiggle out of it. And the private sector can get on with trying to find the best way to do it.

With most public services, however, its not so easy to set out in contractual terms what exactly is to be provided as it is not so easy to define. Think of IT, how in contractual terms do you specify that the product must be easy to use, must be intuitive, must properly fulfil the role is designed for, when for example, ease of use and intuitiveness are all relative. Then it becomes one persons word against another. In the private sector this is overcome by weeding out providers based on business reputation or previous contract outcomes. In the public sector because it is politically driven from the top rather than profit driven, the individuals who make contracting decisions are given no such discretion.

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Although my point is a valid one I can confirm for you that I do currently and since 2003 work in the private sector if that helps you digest my opinion.

Indeed it does :)

I dont quite understand the meaning of your comment that " if I cant tell the difference, chances are you yourself are public sector " I was pointing out that a certain point of view aired daily on here can be misinformed, and that the press article posted by the OP evidences that.

I stand by the claim that if you can't see that a 'private sector' company doing public sector work that was formerly done by public sector workers being paid out of tax revenues previously committed to public sector organisations is de facto simply public sector with someone skimming the cream, then I would have to suspect you worked in the public sector (or its notionally private subsidiary). To anyone else it is as subtle as a brick through the window, and usually less welcome.

I rather thought there was a big clamour on here to replace public sector with private sector as far as possible. and this being driven by the belief that the public sector must be poor value and inefficient.

I hadn't picked that up. Usually people are looking to get privatised organisations back under public control - utility and transport spring to mind.

We often claim that private sector is more efficient - but then that only really applies to the 'proper' private sector - not the sector mentioned above - and rarely anything to do with 'consultants'.

Quite where we can find that these days though...

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In this case Serco are not providing a public service. They have been tasked with getting a percentage of the IB claimants of IB so that the govt can say we are stopping the scroungers who are working the system. This enables the govt to say they are on the side of "Alarm Clock Britain." They have stopped Labour waste and it is because all these people have come off IB that the unemployment count has gone up. It is politics.

If the Govt actually wanted to provide a public service of getting people that are sick back to work then they would use the public sector.

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The idea that the private sector can provide better public services is absolute nonsense. They're main aim is profit - that's what a private company is set up to produce. They don't give a toss about society and they don't give a toss about the public realm. They'll do it on the cheap, cream off the profits and leave the taxpayer with the crap to clean up - it's a gravy train ..taxpayers are being ripped off by these companies.

+2

I think people bemoan the public sector because it got too big, too costly, too meddlesome and lost its public service ethos. What seems to have replaced it are a few favoured companies like Serco which offer questionable added value but cost as much - they are de facto public sector companies on the taxpayer teat. Their executive excesses more hidden than would be in the public sector.

Much of what we have with some of the services is the political need to be 'seen to be doing' something. Albeit less accountable. This is perhaps where the drive to persecute ordinary people with various zealotry is coming from - systems of watching and fining people all need an infrastructure to support them.

Edited by tinker

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The public sector vs private sector issue is almost a paointless argument. The real problem is big vs small. Big organisations whether public or private are always totally corrupt and waste huge amounts of money and skim off the rest. In some cases big companies can provide economies of scale but really I'd rather have lots of small organisations.

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The idea that the private sector can provide better public services is absolute nonsense. They're main aim is profit - that's what a private company is set up to produce. They don't give a toss about society and they don't give a toss about the public realm. They'll do it on the cheap, cream off the profits and leave the taxpayer with the crap to clean up - it's a gravy train ..taxpayers are being ripped off by these companies.

Not true in every case, I work for a not for profit private sector care company that was created out of privatisation of elderly care, the company does everything it can for it's clients some funded by the government and some funded privately but everyone gets the benefits. Only problem is the government haven't paid the going rate for the last 10 years and progress to create the environment within care homes that is inviting and moved away from what was inherited i.e. the old institutionalised 70s style care home has been slower than everyone would have liked.

As for not giving a toss there are always some individuals that are complete scum but as a company I have never worked anywhere that bent over backwards so much to try and ensure it's clients needs are met.

I swear I work in the only sector that the government have turned the screw on in the last 10 years.

Edited by pezo

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I work for one of these companies keen on picking up public sector work and in my opinion they are sailing pretty close to being fraudulent. The model appears to be lie to the client about capability, ****** it up for as long as possible for as little as possible for long enough to make exiting the contract difficult. All the time shift as much work to India as possible whilst stripping benefits from existing staff as soon as they can.

The idea that the likes of serco have the slightest altruistic nature is laughable. It's just more troughing with less accountability. I would love to see the mates of mates at the top of capita and serco.

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These faux private companies are another poisonous legacy of NewLab. The logic of "private sector works better" only applies to services which would exist ANYWAY if they were not provided for with public money, ie countries without national healthcare still have a healthcare sector. A4E would not exist without government contracts so it is not private sector, it is just a racket, doing what the public sector should be doing, but creaming off huge money in the process.

Edited by Britney's Piers

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These faux private companies are another poisonous legacy of NewLab. The logic of "private sector works better" only applies to services which would exist ANYWAY if they were not provided for with public money, ie countries without national healthcare still have a healthcare sector. A4E would not exist without government contracts so it is not private sector, it is just a racket, doing what the public sector should be doing, but creaming off huge money in the process.

Yes

Unfortunately, it's looking like Dave and Georgie will finish off what Blair started. Certain posters on here had better be careful about what they wish for.

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It will be interesting to see if these private 'employment providers' can also turn a profit by sanctioning people and just cutting them off- would this not be more simple than finding them jobs? After all, will not a stick be required as well as carrot?

And it would provide cover for the Government too- it would not be them doing the deed, just a nasty private company.

Will even the tories give private providers the power to leave disabled people destitute and homeless?

Yeah Of course they f*cking will. The millionaires club just love the smell of terrified cripples in the morning. :D

If I were Serco I would not waste my time trying to find unskilled, inexperienced, sick people jobs- I would instead focus my efforts on ways and means to trick these people into breaking rules and then cut off their benefits- job done!

The Jobcenters are already doing this and one might expect the private sector to be more effeciant no doubt.

Edited by wonderpup

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The key point is that government is rapidly ceasing to be a means of protecting and serving the Common Weal . Instead it has simply become an instrument whereby taxpayers money is funnelled to certain favoured 'corporations', most of whom would not exist or survive in a genuine free market. It is a form of Bourbon capitalism based around obtaining politically influence to win contracts. The problem is that as with pre revolutionary France an economic model based around private entities farming taxes from an increasingly impoverished population does not have much of a future,particularly as the tax generating base shrinks and the penny starts to drop with the masses that while the tax burden is rising they are actually seeing less and less of a return on their money.

Edited by stormymonday_2011

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These faux private companies are another poisonous legacy of NewLab. The logic of "private sector works better" only applies to services which would exist ANYWAY if they were not provided for with public money, ie countries without national healthcare still have a healthcare sector. A4E would not exist without government contracts so it is not private sector, it is just a racket, doing what the public sector should be doing, but creaming off huge money in the process.

I almost agree, apart from the fact that these faux private companies (I like the name that you gave them) are agnostic to political party.

They are the mechanism by which politicians and senior public sector employees can reward themselves financially once their "public service" is finished.

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Its all smoke & mirrors...employing companies like this make it look as if the govt are "cracking down on the workshy"...they aren't really...It'll be as ineffective as those companies, be it Maximus, A4e what have you were doing with the new deal...they have such a poor conversion rate of taking people of benefit permanently, the only real conclusion that I can really come to that it is giant scam..."I'll scratch your back, and you'll scratch mine"..

Always has, always will be. The new back to work scheme will just be as much as a failure as new deal... Now, if you prioritised contracts to local non-profit organisations, I think they would have a significantly higher "hit rate"...

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